If you want to be discouraged about the way affordable housing has done in Texas all you need to do is closely followed the public corruption trial of Dallas elected officials currently going on in the federal district court. The Low Income Housing Tax Credit program in Texas is too often only about the people making money and the people trying to make money off of building housing and is too often not at all about the people who need that housing for a home.

The level of cynicism, corruption and greed surrounding the Texas Low Income Housing Tax Credit program as it operated in Dallas is appalling.

Both elected officials and so-called community activists never express any concern about families who need housing. They’re too busy trying to secure a contract for themselves or their cronies to make some money on the housing tax credit “deal.” The developers in the housing tax credit community, far from the innocent victims of corrupt public officials who are attempting to shake them down, are, if we are to judge from the secret recordings, complicit in fueling a cynical and perverted greed driven culture.

The news media has done a good job of laying out the jockeying for political position by the developers and the crude shakedowns by local officials. I won’t replay that evidence here.

But I was struck by a portion of a conversation that was secretly recorded by FBI informant and Low Income Housing Tax Credit developer Bill Fisher with former Dallas Planning Commissioner D’Angelo Lee and former Dallas Mayor pro tem Don Hill. What’s interesting about this conversation is how the developer/FBI informant and the allegedly corrupt public officials found common ground. What brought them together was a perfectly legal conspiracy to figure out how to steer housing dollars away from housing the poor and into other activities.

I’ve reproduced a portion of the transcript of the meeting that was secretly recorded for the FBI by tax credit developer Bill Fisher. This portion of the transcript begins with indicted former Dallas Planning Commissioner D’Angelo Lee asking Fischer to show him how to do a housing finance bond “deal” that developers like Fisher use to make their money.

Fischer, earlier in the meeting attempted repeatedly and unsuccessfully, in what can only be described as a comically transparent manner, to get Lee to admit that the quid pro quo for gaining approval for Fischer’s low income housing tax credit development from Mayor pro tem Don Hill was hiring cronies of Lee and Hill’s. But Fisher switched gears when the conversation turned to enlisting the support of the Dallas officials to get the legislature to change the rules of the housing program. In an apparently candid and sincere effort, Fisher urges Lee and Hill to get the legislature to allow housing bonds to be used for non-housing purposes and to reduce the requirement that the housing units created with the bonds have low rents in order to house low income families. This seems to have been an area where the disgruntled tax credit developer could find common ground with public officials he deemed to be corrupt.

PORTION OF TRANSCRIPT OF GOVERNMENT EXHIBIT 5422

D’Angelo LEE: Bill? Can you, can you show me the various types of bond deals that developers use?

Bill FISHER: Yeah. ‘Cause you know I’m doing the, I’m doing the very first one ever done state wide ahh that involves mixed income mixed use. So I had the only bond project in the state that has combined tax credit, tax exempt bonds, housing and retail. And ahh, projects I’m doing in San Antonio. And, you know, the state’s program, 90% of it is all around affordable housing. There is a state-wide issue of the Texas State Affordable Housing Corporation, TSAHC, which got a separate allocation of bond money this last year designed to allow cities to do RFPs with them to do specific developments and they short cut all the, you know, they don’t have to prioritize rents or anything else.

Indicted former Dallas Mayor Pro Tem Don HILL: My goodness.

FISHER: So, I have a development in San Antonio that’s like 150 units of market rate apartments, a hundred units of affordable housing, about 10,000 square feet of retail all in a big site under a new, new zoning. Yeah, but again this is ahn this is kinda the genesis of the idea. And that’s what the city of San Antonio told me a long time ago they did not want 100% affordable housing. They want affordable housing, but they want it mixed in with market rate housing. But I told the mayor and the housing directors that’s great, you need to tell somenody at the state. ‘Cause everything they do is, is all geared to the project being 100% affordable and not only that a preference to the lowest rent. So if you’re prepared to restrict your ahh development to 100% at 50% rent, you get first, first calI on the dollars that are available.

HILL: STUTTERING Are our rules or attitudes any better?

FISHER: With, with the city of Dallas? Ahem~ actually I’m just healing …

LAUGHTER

FISHER: … in the last round, in the last round.

HILL: And I understood the rules about, I mean, but basically that, that was, that was a, oh we have a role in it. I mean, so, so we never really, we haven’t had a discussion about whether, what, what role we oughta be plaYlng at a state level to create the kind of housing that we want. I mean basically we, we, we been kind of a oh, we have a say in it. OK, well, then we’ve gotta say.

FISHER: Now they say your people drive it. Half of the program rules you dealt with this year are from Jesse Jones and Royce West and they overlap your district and Fantroys and …

HILL: Yeah.

FISHER:… Maxine’s and everybody else so. If you wanta figure out what you want and go to them, they’re in a good position to get what you want.

HILL: We, we, we need to start, we need to start doing a better job of talking with them about that because I ahh …

FISHER: But first you have to decide what you want. And the one thing that the city of San Antonio, the mayor there who is kind of a land planner, he and his housing director decided a long time age that they didn’t like 100% affordable. They really wanted, they really wanted mixed income.

HILL: I can agree with that.

FISHER: And, they were the very first people to get a TSAHC to do an RFP involving other uses and they want retail on the ground floor, they want housing around, they want a day care center in there, they want if they could get it, they’d like [Unintelligible] they do an 80/20 if they would that is just difficult to work economically. 80% market and 20% affordable, but ahh, these mixes in the 60/40 range, 50/50 where it’s half market, half affordable with retail. See bonds can’t finance that unless you’re under their, this kinda special program. Your housing department got a notice from TSAHC here in the last year saying give us some criteria, they didn’t respond.

HILL: They, we denlt because we haven’t had a policy discussion. I didn’t know how much …

FISHER: Well, have they initiated one [Unintelligible] …

HILL: No, no and [Unintelligible] …

FISHER: 75 million dollars …

HILL: … what the hell are we doing?

FISHER: You can [Unintelligible] on this or you, you can go [Unintelligible] on the RFP is on this block. [Unintelligible] have it right here.

HILL: Part of, part of, I think part of what is happening, you may know this, but there is a, there is a history in our city of not really dealing with the state on housing issues at all. And it’s only since 98 or 99 that we began to kinda even begin to even work with it. And it’s only since Killingsworth has been there that we, that we’ve really been addressing these issues seriously. So we, we haven’t had a policy discussion about this. And we need to have one.

FISHER: Oh, I would have thought the staff would have initiated it by saying hey guys we have the right to ahh be in RFP for a hundred rrillion dollars here, are you interested in us participating, so.

FISHER: Ahh, no actually it’s not. I think that, I was over in Arlington, worked on the project in Arlington into the neighborhood over there. They wanta [Unintelligible], they did not want affordable houses, they wanted an old property torn down and rebuilt. Ahem, the seller was just completely unreasonable so what did I do, I went to the housing director there, Trey Yelverton, said Trey, call TSAHC. They will do your deal. They’ll will do an RFP, [Unintelligible] cannot block, if that’s what you want and narrow the traoes down and so Arlington has an RFP with TSAHC, Corpus Christi has one. Then again it’s, the genesis of it is usually now from the city. They’re coming tc TSAHC and saying this is what we want. Although again, TSAHC has sent notices out to many of these corrnnunities to get an input on what they want.

HILL: STUTTERING Is part of the, could part of the reason or how would, how does a ahh your, your local HFC. How does that play into that at all? So maybe their, Jerry’s, I mean Jerry seems to drive every dollar he can and so much of the focus ends up being the Housing Finance Corporation.

PHONE RINGING

HILL: I didn’t know whether that’s the conflict. Maybe that’s the reason why we’re not hearing enough about it because he wants to …

FISHER: Yeah, they can’t be the issuer but again this is where you go to your State Rep and say let me be the issuer for some of TSAHC’s money again. It was just a matter of getting the ahh opportunity to ahh, ahh you know come up with what, you know, with something that would run through the HFC. The Legislature is coming to meet now, I mean, now is the time to be talking to ’em. And say look we like what TSAHC’s doing, we can custom tailor your deal.

HILL: Can you get me some information on it?

FISHER: Sure. Sure, yeah, you asked me to do that and …

HILL: STUTTERING Let me say something to you, as kind of an aside now. Now, ahh, we, we recognize that, that ahh we had some struggles in these last few deals. But D’Angelo ahh is, is thoroughly, thoroughly, thoroughly impressed with your knowledge of what you’re doing. And, and we’re hopeful that in some way over a period of time as wounds heal, as you do better, then, then we’ll be able to kinda, kinda re, re-forma re-formulate the relationship here because we think that you’re a good creative guy and you could really help us in a lot areas because we, we right now we know we’re not ganna be able to just go back to, to either our Council, to the communities you can make the case, but to the Council just going back with just straight apartment projects, it doesn’t, you end up with a big fight that really oughta not be a fight and we really don’t like this whole, we’re not that comfortable with this whole notion of a Council person knows what he thinks he oughta be able to do and at the same time the Council itself may think they’re on a entirely different track. And there are arguments with both sides of that whole discussion, but frankly I think a Council member oughta have an awful lot of say in what goes on in his district. So, so we gonna have to come up with more creative ways of putting a product on the ground that can have less Council opposition, won’t be quite as polarizing as it, as it can be, maybe some of the stuff we ran into this last time. So, hopefully, over time, you keep doing what you’re doing ahh you keep healing ahh and D’Angelo’s pretty determined to kinda keep trying to work with you so, I mean, that, that’s gonna happen so ahh I mean If I recognize it’s not necessarily a easy deal to get over all that. But I, if I think that if you want to you’ve got a good future here in this city particularly with the, your knowledge and what you’re trying to get done is really pretty good, pretty good.

LEE: Well, we particularly in our district tract of land that you know we’ve been really trying to get developed, and I’ve met with some developers and you know about it and I just was really wasn’t impressive you know with anything you know they had to offer. You know, I mean, can, can you, You know, stretch me a little bit. Can you be a little bit more creative. I said, heard that, done that. And I would, you know, ~ would like for you to even you know look at it and you know share some of the various types of ahh, you know, funding avenues that are there to see can we get some creative things. ‘Cause you know I’m a, I’m a, a fond believer in mix used development. I mean, you know, I, I just think that it works. And it works in any urban context. I don’t think that we’ve done, you know, as good of a job in the southern sector to bring that type of product.

HILL: Yes, very definitely.

Yesterday I blogged that while a handful of local officials and housing developers may be sent to prison in the wake of the Dallas housing tax credit scandal, it is the culture of greed, the lack of real competition in the housing program and the flawed process of awarding housing tax credits that allowed corruption to take root.

An example of the strange bedfellows created in this culture of greed can be found in a conversation secretly recorded by FBI informant and low income housing tax credit developer Bill Fisher, that was introduced into evidence by the prosecution.

Fisher was meeting with former Dallas Planning Commissioner D’Angelo Lee and former Dallas Mayor Pro Tem Don Hill (both now on trial for public corruption). For the first part of the meeting Fisher was engaged in a comically repetitive and ultimately unsuccessful effort to get former planning commissioner Lee to directly ask him for a bribe by way of hiring some acquaintances on a contract to build Fisher’s tax credit housing development which was pending approval with the city.

What struck me as interesting about this conversation is how the developer/FBI informant Fisher and the soon to be indicted public officials found something they could agree to work together on during the second half of their meeting. What brought them together was a perfectly legal plan to steer housing dollars away from housing the poor and into other activities more to their financial benefit.

Fisher sought the help of Dallas officials Lee and Hill to get the Texas Legislature to hand over authority to an entity controlled by the city to issue state authorized low income housing bonds. They talked of how to do away with the cost burdening imposition of keeping the rents affordable in 100% of the apartments. Fisher talks of allowing “mixed-income” developments in which only 20% of the apartments have affordable rents.

While there is nothing per se wrong with “mixed-income housing,” it is clear to me that this discussion was not about the social benefits of economic integration of low-income tenants but about control of the public money and about a developer and some allegedly corrupt local officials securing a financial benefit.

Fisher sought help from Lee and Hill to get control of the housing bond process away from the state housing agency and into the hands of the more pliable Texas State Affordable Housing Corporation, or better yet, to give the bonds to the City of Dallas agency overseen in part by the very people who Fisher had been accusing of bribery. While Fisher was wearing an FBI wire and busily trying to get these guys to demand a kickback, he was earnestly enlisting their political influence to get more public funds, with less oversight and fewer strings, turned over to a local corporation they could influence or control.

This was an area where the disgruntled housing tax credit developer turned FBI informant, found common ground with the public officials whose corruption he was going to extraordinary efforts to prove.

I have reproduced this portion of the transcript of the meeting. It begins with former Dallas Planning Commissioner Lee asking Fischer to show him how to do a housing finance bond “deal” that developers like Fisher use to make their money.

PORTION OF TRANSCRIPT OF GOVERNMENT EXHIBIT 5422

D’Angelo LEE: Bill? Can you, can you show me the various types of bond deals that developers use?

Bill FISHER: Yeah. ‘Cause you know I’m doing the, I’m doing the very first one ever done state wide ahh that involves mixed income mixed use. So I had the only bond project in the state that has combined tax credit, tax exempt bonds, housing and retail. And ahh, projects I’m doing in San Antonio. And, you know, the state’s program, 90% of it is all around affordable housing. There is a state-wide issue of the Texas State Affordable Housing Corporation, TSAHC, which got a separate allocation of bond money this last year designed to allow cities to do RFPs with them to do specific developments and they short cut all the, you know, they don’t have to prioritize rents or anything else.

Indicted former Dallas Mayor Pro Tem Don HILL: My goodness.

FISHER: So, I have a development in San Antonio that’s like 150 units of market rate apartments, a hundred units of affordable housing, about 10,000 square feet of retail all in a big site under a new, new zoning. Yeah, but again this is ahn this is kinda the genesis of the idea. And that’s what the city of San Antonio told me a long time ago they did not want 100% affordable housing. They want affordable housing, but they want it mixed in with market rate housing. But I told the mayor and the housing directors that’s great, you need to tell somenody at the state. ‘Cause everything they do is, is all geared to the project being 100% affordable and not only that a preference to the lowest rent. So if you’re prepared to restrict your ahh development to 100% at 50% rent, you get first, first call on the dollars that are available.

HILL: STUTTERING Are our rules or attitudes any better?

FISHER: With, with the city of Dallas? Ahem~ actually I’m just healing …

LAUGHTER

FISHER: … in the last round, in the last round.

HILL: And I understood the rules about, I mean, but basically that, that was, that was a, oh we have a role in it. I mean, so, so we never really, we haven’t had a discussion about whether, what, what role we oughta be playing at a state level to create the kind of housing that we want. I mean basically we, we, we been kind of a oh, we have a say in it. OK, well, then we’ve gotta say.

FISHER: Now they say your people drive it. Half of the program rules you dealt with this year are from Jesse Jones and Royce West and they overlap your district and Fantroys and …

HILL: Yeah.

FISHER:… Maxine’s and everybody else so. If you wanta figure out what you want and go to them, they’re in a good position to get what you want.

HILL: We, we, we need to start, we need to start doing a better job of talking with them about that because I ahh …

FISHER: But first you have to decide what you want. And the one thing that the city of San Antonio, the mayor there who is kind of a land planner, he and his housing director decided a long time ago that they didn’t like 100% affordable. They really wanted, they really wanted mixed income.

HILL: I can agree with that.

FISHER: And, they were the very first people to get a TSAHC to do an RFP involving other uses and they want retail on the ground floor, they want housing around, they want a day care center in there, they want if they could get it, they’d like [Unintelligible] they do an 80/20 if they would that is just difficult to work economically. 80% market and 20% affordable, but ahh, these mixes in the 60/40 range, 50/50 where it’s half market, half affordable with retail. See bonds can’t finance that unless you’re under their, this kinda special program. Your housing department got a notice from TSAHC here in the last year saying give us some criteria, they didn’t respond.

HILL: They, we didn’t because we haven’t had a policy discussion. I didn’t know how much …

FISHER: Well, have they initiated one [Unintelligible] …

HILL: No, no and [Unintelligible] …

FISHER: 75 million dollars …

HILL: … what the hell are we doing?

FISHER: You can [Unintelligible] on this or you, you can go [Unintelligible] on the RFP is on this block. [Unintelligible] have it right here.

HILL: Part of, part of, I think part of what is happening, you may know this, but there is a, there is a history in our city of not really dealing with the state on housing issues at all. And it’s only since 98 or 99 that we began to kinda even begin to even work with it. And it’s only since Killingsworth has been there that we, that we’ve really been addressing these issues seriously. So we, we haven’t had a policy discussion about this. And we need to have one.

FISHER: Oh, I would have thought the staff would have initiated it by saying hey guys we have the right to ahh be in RFP for a hundred rrillion dollars here, are you interested in us participating, so.

LEE: Since we know that …

FISHER: I’m not being critical of them, I’m just surprised that the subject hasn’t come up, ahh …

HILL: STUTTERING It, it and …

LEE: Is it too late?

FISHER: Ahh, no actually it’s not. I think that, I was over in Arlington, worked on the project in Arlington into the neighborhood over there. They want a [Unintelligible], they did not want affordable houses, they wanted an old property torn down and rebuilt. Ahem, the seller was just completely unreasonable so what did I do, I went to the housing director there, Trey Yelverton, said Trey, call TSAHC. They will do your deal. They’ll will do an RFP, [Unintelligible] cannot block, if that’s what you want and narrow the traces down and so Arlington has an RFP with TSAHC, Corpus Christi has one. Then again it’s, the genesis of it is usually now from the city. They’re coming tc TSAHC and saying this is what we want. Although again, TSAHC has sent notices out to many of these commnunities to get an input on what they want.

HILL: STUTTERING Is part of the, could part of the reason or how would, how does a ahh your, your local HFC. How does that play into that at all? So maybe their, Jerry’s, I mean Jerry seems to drive every dollar he can and so much of the focus ends up being the Housing Finance Corporation.

PHONE RINGING

HILL: I didn’t know whether that’s the conflict. Maybe that’s the reason why we’re not hearing enough about it because he wants to …

FISHER: Yeah, they can’t be the issuer but again this is where you go to your State Rep and say let me be the issuer for some of TSAHC’s money again. It was just a matter of getting the ahh opportunity to ahh, ahh you know come up with what, you know, with something that would run through the HFC. The Legislature is coming to meet now, I mean, now is the time to be talking to ’em. And say look we like what TSAHC’s doing, we can custom tailor your deal.

HILL: Can you get me some information on it?

FISHER: Sure. Sure, yeah, you asked me to do that and …

HILL: STUTTERING Let me say something to you, as kind of an aside now. Now, ahh, we, we recognize that, that ahh we had some struggles in these last few deals. But D’Angelo ahh is, is thoroughly, thoroughly, thoroughly impressed with your knowledge of what you’re doing. And, and we’re hopeful that in some way over a period of time as wounds heal, as you do better, then, then we’ll be able to kinda, kinda re, re-forma re-formulate the relationship here because we think that you’re a good creative guy and you could really help us in a lot areas because we, we right now we know we’re not gonna be able to just go back to, to either our Council, to the communities you can make the case, but to the Council just going back with just straight apartment projects, it doesn’t, you end up with a big fight that really oughta not be a fight and we really don’t like this whole, we’re not that comfortable with this whole notion of a Council person knows what he thinks he oughta be able to do and at the same time the Council itself may think they’re on a entirely different track. And there are arguments with both sides of that whole discussion, but frankly I think a Council member oughta have an awful lot of say in what goes on in his district. So, so we gonna have to come up with more creative ways of putting a product on the ground that can have less Council opposition, won’t be quite as polarizing as it, as it can be, maybe some of the stuff we ran into this last time. So, hopefully, over time, you keep doing what you’re doing ahh you keep healing ahh and D’Angelo’s pretty determined to kinda keep trying to work with you so, I mean, that, that’s gonna happen so ahh I mean If I recognize it’s not necessarily a easy deal to get over all that. But I, if I think that if you want to you’ve got a good future here in this city particularly with the, your knowledge and what you’re trying to get done is really pretty good, pretty good.

LEE: Well, we particularly in our district tract of land that you know we’ve been really trying to get developed, and I’ve met with some developers and you know about it and I just was really wasn’t impressive you know with anything you know they had to offer. You know, I mean, can, can you, You know, stretch me a little bit. Can you be a little bit more creative. I said, heard that, done that. And I would, you know, would like for you to even you know look at it and you know share some of the various types of ahh, you know, funding avenues that are there to see can we get some creative things. ‘Cause you know I’m a, I’m a, a fond believer in mix used development. I mean, you know, I, I just think that it works. And it works in any urban context. I don’t think that we’ve done, you know, as good of a job in the southern sector to bring that type of product.